Tax trap: Reporting obligation for gifts in Germany and secondary residence in Austria

23 Februar 2017

On November 4th, 2016 the German Bundesrat adopted a capital transfer tax reform, which took effect retroactively on July 1st, 2016. This resulted in a large number of tax-advantaged transfer processes prior to the entry into force of the new law. In this respect it needs to be noted that gifts made or received by foreigners may lead to reporting obligations in Austria, if one party has an Austrian residence.

Particularly the following gifts and donations require notification obligations:

  • Cash
  • Capital claims (savings accounts, bonds, loan claims)
  • Shares in corporations and partnerships
  • Participation as a silent partner
  • Establishments and operational units that generate operating income
  • Movable physical assets (vehicles, power and sail boats, jewels, gemstones, etc.)
  • Intangible assets 

The reporting obligations apply to both, donor and donee. The obligation of notification arises as soon as one of both parties, either doner or done, has an Austrian place of residence or habitual residence (or an Austrian statutory seat or the place of effective management for a company) by the time of donation.

Notification also applies to individuals with an established secondary residence in Austria. The Austrian secondary residence regulation (“Zweitwohnsitz-VO”) states that under certain circumstances a domestic accommodation is not subject to unlimited tax liability. However, this does not apply to the obligation to report gifts since the stated regulation applies only to the Income Tax Act. Thus, the secondary residence regulation does not release from the obligation to report gifts to the appropriate Austrian tax office. Particular practical significance is reflected in the fact that having a vacation apartment in Austria, used only for some days or weeks a year, may justify a secondary residence and therefore cause reporting obligations in Austria, regardless of the situs of the donated item.

Reporting obligations arise within three months from the date of donation on and have to be sent to the respective Austrian tax office by then.

In case the report was willfully omitted (conditional intent is sufficient), this breach of financial regulations will implicate a penalty of up to 10 percent of the donations fair value. In cases where the report obligations have not been fulfilled by now, both parties to the transaction may proceed by a precautionary voluntary self-disclosure. In order to avoid any penalty, this has to be presented within one year after the end of the three-month notification period.